Horizon Energy cuts profit forecast on derivative losses

Monday 2nd February 2009

Horizon Energy Distribution, which operates a power network in the eastern Bay of Plenty, cut its profit forecast by about 25% because of losses on interest rate derivatives.

The company expects to report a full-year profit of about $4.4 million, it said in a statement. The estimate comes five months after Horizon raised its forecast to between $5.7 million and $6 million, citing the higher-than-expected settlement of a dispute with a supplier.

"This lower forecast arises from the accounting recognition of mark to market losses on the Company's interest rate derivatives following recent reductions in wholesale interest rates," the company said.

Under New Zealand's version of International Financial Reporting Standards, Horizon was obliged to immediately recognize changes in the fair value of derivatives in its P&L statement. The non-cash expense won't erode Horizon's final dividend payment and the company is well-placed to benefit from lower interest rates, it said.

Horizon is 77% owned by the Eastern Bay Energy Trust, with the balance of its shares trading on the NZX. The shares last traded on January 29 at $3.20 and are down 4% in the past 12 months.

By Jonathan Underhill

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